PA Funds Beg Appeals Court to Stop Auditor General
Exams

June 9, 2004 (PLANSPONSOR.com) - Pennsylvania's two
largest retirement funds have turned to the state's appeals
court to prevent the state's auditor general from examining
the retirement systems' investment practices.

Attorney Edward Mannino, who represents the
Public School Employees’ Retirement System (PSERS)
and the State Employees’ Retirement System (SERS),
told
Commonwealth Court judges that
Auditor General Robert Casey’s only interest in
auditing the funds’ investment is to add fodder to his
political agenda.
Rather, Mannino said Casey should have an
independent, outside auditor examine the performance of the
two boards – one who might have more expertise in
evaluating pension funds, according to an Associated Press
report.

Together, the two funds
manage more than $67 billion in assets for
approximately 580,000 government workers and
retirees.

Mannino’s argument is the latest step in the ongoing
battle between the funds and Casey.
The funds argue
Casey does not have the authority to conduct the
audits while Casey contends he has both constitutional and
statutory authority for the audits.
Attempting to enforce his authority,
Casey has said he is interested in scrutinizing how
the boards’ overseeing the two huge funds select and
monitor the teams of private-sector advisers who help
direct where the systems invest their money.
The funds have refused to provide Casey with any
information.

Yet this has not deterred Casey, who in January asked
the courts to force PSERS and SERS to “consent to and
cooperate with” the Auditor General’s audits and to turn
over the documents Casey has demanded.
This came after Casey issued subpoenas to PSERS
Chair State Treasurer Barbara Hafer and SERS Chair Nicholas
Maiale when they refused to provide the Auditor General
with crucial documents regarding the Funds’ investment
operations (See
PA. Auditor General Subpoenas Public Pension
Funds
).

Predictably, the ongoing battle has put
DemocratCasey at odds with state Treasurer Barbara
Hafer
, a Republican.
Casey is running against Republican Jean
Craige
Pepper to replace
Hafer
as treasurer when her term ends in January and it is
those political interest that Mannino says have taken
over in this case.

Judge Dan Pellegrini met that argument with some
skepticism.
“Why are you opposing this so vigorously?”
Pellegrini
asked, noting that many of the documents Casey had
requested from the boards were public records. “He has the
right, as the auditor general, to do a performance audit
and say whether you’re doing a good job or a bad job.”

In fact, as of June 30, 2003, PSERS has 44.2% of its
assets in domestic stocks, 17.8% in international stocks,
20.8% in domestic and international fixed income
investments, 8.9% in alternative investments, 6.7% in real
estate, and 1.6% in cash and cash equivalents.

No indication was given by theCommonwealth Court when it would rule on the
case.